Hellofresh Se Ord

Good morning, everyone. We're pleased to welcome you to our Q1 2023 earnings call today. I think we're just off of a very solid first quarter, especially considering the world we were living in last year. First time over 2 billion euros per quarter, profitability better than guided as we made more progress on many cost initiatives. And our RTE business has been going very strongly, yet its capacity constraints since middle of January. Over the course of last year and also the last quarter, we've dealt with a rapidly changing macroeconomic environment in which the team overall showed great adaptability. If you remember last year in Q1, Omicron wave still rampaged through the world. Google recorded the highest search volumes for COVID and different governments were actually mandating stay at home orders. And all these things contributed to a really outsized first quarter in Q1 2022. and has provided a tough benchmark year over year for the first half of 2023. We don't want to lament though too much as these macro effects, I think, impact all businesses around the world. We rather want to focus on the things that we actually can control. And that's also the message that we have given to our teams and rallied our troops around all year long. Consequently, over the course of the last 12 months, we've made very significant progress in a number of different areas. We've massively strengthened our leadership levels. We've built a state of the art fresh food fulfillment center network second to none. We have enhanced our customer proposition to previously unseen levels. And we've also scaled both RTE and our prototyping a number of other promising direct to consumer verticals as we speak. This all makes us look fairly optimistic into the second half of the year. and also provides the right ingredients for ongoing strong growth beyond 2023. So let's take a look at the highlights of the first quarter together. We achieved a new record high net revenue quarter, growing 3.3% in constant currency to 2.02 billion euros, the first time we beat the 2 billion euro mark. We grew our average order value by about 9% year over year, to 61.2 euro, a result of measured price increases, more meals per basket, and a positive mix shift to higher value brands. We delivered more value to customers, and they are happy to pay a little more for that. Order rates stabilized at the same high levels that we've seen during the COVID pandemic at four orders per active customer per quarter, a significant step up to pre-COVID times and evidence that customers are finding a lot of value in our product offering. Importantly, our exercise to scrutinize all of our cost line items yielded good results, with contribution margin expanding once again to 26.3%. That's a 1.1 point improvement compared to Q1 2022. As a result, adjusted EBITDA amounted to 66 million euro, which translates into a margin of 3.3% in the quarter where we actually spend most on winning over new customers. All in all, I think this provides a decent start to the year that makes us confident we can deliver on the full year guidance that we issued just a few weeks ago. All of 2022 and also in the first quarter of 2023, we have scrutinized all of our cost line items hard to identify additional savings and optimization potential. More often than not, we've been successful and managed to mitigate all of the inflation-driven cost factor increases through either better productivity or smarter buying decisions. And while it's incredibly important to do that in times like these, it's also when the foundations for future earnings and revenue growth are being laid. And that is why we have continued to invest into the customer proposition throughout the whole cycle in order to be able to attract new audiences to HelloFresh and make our current active customers happier. So as an example, over the course of last year, we have continued to roll out HelloFresh markets to three new geographies with additional geographies launching in the second half of 2023. We have materially decreased our food waste per Euro revenue significantly, thereby improving our sustainability profile and sustainability perception for consumers. And we have massively increased the number of recipe options for our customers. In the last year alone, we have increased the number of weekly recipes by 32% year over year, and the share of customizable meals from 29% to 48% on the menu. These improvements are even more visible when looking at them on a longer time series. Unlike FMCG companies, we have paired measured price increases with providing a lot more value to customers, which has led to very high and consistent average order rates. All of these improvements have allowed us to significantly increase both AOV and average order rates compared to the pre-pandemic era, and allowed us to reach out to broader customer segments in the markets that we operate in today. Outside of our core meal kit market and our HelloFresh market proposition, we've put the whole weight of our direct-to-consumer competencies behind the rollout of Factor in the US. This has propelled us to become the largest direct-to-consumer ready meal provider in the States over the course of only two years. The whole category is still very much in a state of market penetration where meal kits were in 2016 or 2017 with incredible growth potential going forward. What's important to notice that scaling an RTE business is way more complex than a meal kits business given investments needed to cook great meals at scale. As we complete the build out of our Arizona facility in the next couple of months, we will unlock a lot of additional capacity for factory US allowing us to grow to a multiple of our current revenue run rate in the then existing facility footprint. As a matter of fact, at the moment, we're maxed out since early January and cannot fulfill a lot of the demand we're seeing in the marketplace. But this should, on the other hand, provide a nice growth tailwind for the second half of the year as we work through opening up that facility. While Factor already meets the bar in many respects and can create a lot of demand from consumers, there's still a lot of room to grow the proposition, very much analogous to what we did in meal kits over time. We'll be investing into growing our assortment, opening more delivery days and shortening order to delivery leads times, which should open up new audiences for us. Outside of the US, we've also launched Factor in Canada, we will be launching the first ready-to-eat product in Europe in the second half of the year. And for You Foods, our Australian ready-to-eat business, we're in the final steps of completing our facility move and also look towards scaling up production and customer acquisition in the second half of the year. So all in all, RTE provides both for 2023 and also for the mid-term future, a strong growth driver for the group And we're incredibly excited to take full advantage of that. In the first quarter of 2023, we delivered 278 million meals. That's a sequential increase of about 13% versus Q4 2022. Year over year, our meals are down by 3%. driven by a 5% decline in active customers. Active customers did increase though by 14% sequentially, and we've added 1 million net new customers in the first quarter. Both our international segments and our North America segment contributed to that growth and showed good sequential active customer growth rates. While the sequential increase was according to plan, we did not reach the levels previously seen in Q1 2022, a period that was still heavily impacted by stay-at-home orders and people working from home. On a positive note, our average order rates stabilized at much higher levels than pre-COVID, averaging four orders per active customer per quarter, in line with last year's order rate. We've also seen customers adding more meals to their baskets, which have helped drive up Speaking of AOV, average order values saw a strong growth in the first quarter, up about 9% from last year. For our North America segment, we increased AOV by about 9.5% in constant currency, while our international segment showed a 6.9% AOV increase. This positive development was driven by different factors. most notably by higher prices per meal, customers adding more meals to their basket, but also by a slight mix shift to higher average order value products and the take up of HelloFresh market. So despite strengthening our relative affordability by increasing prices a lot less than overall food CPI inflation data suggests, AOV increases were still the primary driver of higher year-over-year net revenue in the first quarter. So taking all of that together, a small decline in the number of meals shipped paired with a strong increase in the average order value have allowed us to show positive year-over-year net revenue growth with a 3.3% constant currency increase compared to the first quarter of 2022. We achieved over €2 billion in net revenue for the first time making that a record quarter for HelloFresh, even higher than the until then record quarter in Q1 2022. Our North America segment contributed with 5.5% constant currency growth, while our international segment remained broadly stable against a very tough comp, down 0.5% in constant currency, to be precise. What we did see last year was that North America was coming out of COVID much earlier, whereas in international, especially in Europe, Q1 was still a very, very tough benchmark, and most people still working from home and were being mandated to shelter at home. With that, I'm going to hand over to Christian to walk you through our margin profile and our adjusted EBITDA outlook.

Okay, super. So let me start as usual with the discussion of our procurement expenses. Our procurement expenses as percentage of revenue have increased by 1.4 percentage points year-on-year in the first quarter. Now, this is driven by a number of factors. Firstly, year-on-year inflation. Still meaningful year-on-year inflation has a certain impact on our procurement expenses. Even so, we continue to manage mitigating the effect well through measures that we had discussed before. Secondly, and importantly, an increased contribution of ready-to-eat to our overall business mix. Keep in mind that new production costs and associated labor are for our ready-to-eat business included in our procurement expenses or better called COGS. However, fulfillment expenses, on the other hand, for ready-to-eat are typically lower. So you will see the flip side of that when we talk about our fulfillment expenses. Thirdly, what Dominic just discussed, so our customers ordering more meals per order, ordering more surcharge offerings and add-on offerings from HelloFresh market. Especially those last two points, whilst they're impacting relative procurement expenses, they also increase AOV and have lower incremental fulfillment expenses associated with them. They are therefore net accretive to contribution margin, both relative and in absolute terms. For Q2, by the way, you should expect procurement expenses as percentage of revenue to go down slightly sequentially, i.e. our gross margin in Q2 is expected to expand mildly sequentially versus Q2. But let's have a look now at our fulfillment expenses. We have very meaningfully decreased our fulfillment expenses year on year by 2.4 percentage points. This is really the continuation of the strong improvement that you've seen from us since mid last year. Especially our North America segment continues to contribute significantly to this positive trend. As we had discussed in detail at our capital market day last month, we see meaningful potential to further reduce our relative fulfillment expenses from here by one, increasing the maturity of our fulfillment center network through optimizing our fulfillment center footprint and through process standardization. And secondly, by ramping up the use of technology and automation. Besides the like for like ongoing improvements, You see here also the flip side of what I just discussed with respect to our procurement expenses, i.e., the impact of a higher share of ready-to-eat, more meals per order, more surcharge, and add-on take-up, which means lower relative fulfillment expenses. Now, taking both together, so the trends that we discussed in procurement as well as in our fulfillment expenses means for our contribution margin, that we have successfully expanded our contribution margin by one percentage point to 26.3%. So just to recap what we discussed in much more detail at our Capital Markets Day a month ago, we are targeting to expand our contribution margin to approximately 29% by 2025. i.e. up circa 3.5 percentage points versus where we landed in 2022. Of this improvement, we want to realize at least one percentage point in 2023 already. What we see here from our Q1 results is that so far we are well on track to do that. Now let's have a look at our marketing expenses for Q1. From a marketing perspective, we are now back to our normal seasonality profile, i.e. a seasonally high growth marketing spend in Q1, which drives a substantial sequential increase in active customers. We grew active customers by 1 million from 7.1 million in Q4 2022 to 8.1 million in Q1 2023. As a percentage of revenue, marketing expenses were just above 20%, i.e. very much in line with indicative guidance provided at our last earnings call in early March, about eight weeks ago. Now, while in Q1, marketing as percentage of revenue was still around about three percentage points higher than in the comparative period last year, given Q1 2022 was still impacted by Omicron effect, we expect in Q2, marketing expenses as percentage of revenue still a bit higher than last year, but much closer, so around about a one point delta between the two periods. With that, let's have a look at the development of our EBITDA. Given the return to normalcy reality in our marketing spend based on the trends just discussed, we delivered an EBITDA in Q1 of 66 million. This is 33 million lower than last year. GIMP Q1 2022 still had some Omicron effects, but it is a touch better than what we had initially penciled in for Q1 EBITDA. The reasons for that are one, the contribution margin was slightly better than what we originally set as a target. And secondly, that EBITDA in Q1, which is seasonally compressed, very much depends on how some of our marketing campaigns in the latter half of the quarter are exactly sized. The more important point from what we showed you now is as a key takeaway, we had an overall decent start. So far, things are very much in line with plan and that cuts really across our whole P&L in terms of orders, customers, revenue, and EBITDA. We are therefore on track. With respect to the full year guidance provided on our earnings call about eight weeks ago, where we were targeting for the full year, two to 10% constant currency revenue growth and the EBITDA of 460 to 540 million euros. Now with respect to Q2, it's obviously still relatively early in the quarter. So far, current trading mostly consists of the seasonally slow Easter weeks. So with that caveat in mind, We indicatively expect for Q2 2023 active customers of approximately 7.7 million, and year-on-year content-county revenue growth of 1% to 2%. And then, as we discussed before, again, easier comps in H2, a reacceleration of top line thereafter. Let me now finish our presentation with a quick review of our cash flow in Q1. Cash flow from operations amounted to 112 million, as usual, supported in that quarter by seasonal cash inflow from working capital. Our cash outflow from investing activities primarily consists of two elements. Firstly, we run about 95 million of capex, as flagged a few times before. Of the approximately 350, 360 million capex we're planning to spend this year, we will invest a fair amount of this in the first seven to eight months of the year. Specifically in Q1, we have made good progress on the ready-to-eat facility for Factor in the US. We finished the build-out of our ready-to-eat production facility for YouFood in Australia. We largely finalized the build-out of our French fulfillment center and also made good progress on the execution of our overall CapEx plan in other geos. 95 million capex is the biggest piece of this. And the second one is 35 million for the acquisition earn out of factor. This represents not a final payment to former factor shareholders, i.e. there's no more cash outflow in this regard in the future. This means we maintain our cash balance at a strong 467 million. Our balance sheet remains largely unlevered. and there were no changes to our liquidity resources during the quarter. One last housekeeping point just before we turn to Q&A. Just to remind you that from a segment reporting perspective, as we mentioned in our annual report already and at the Capital Market Day, we report our Canadian business as of this quarter as part of a North America segment. So that has moved from our international segment over to our North America segment. And with that, we very much look forward to your questions.

And the first question comes from William Woods. Please go ahead.

Hi, good morning. I'm just interested to think about the pricing that you've put through in the different markets and obviously the impact on customer numbers as well. It looks like you're able to pass on a bit more pricing in the US, but not internationally. Why are you not passing on more inflation internationally when most of the international markets inflation is much higher? And is it because you're seeing a greater volume elasticity? Thank you.

Hi, William. Let me take that question. I would say two reasons for US pricing a bit higher. Number one, I think you can see that, especially in the direct-to-consumer world, US brands have increased pricing a lot more in North America than in Europe. And secondly, it's also a bit of a timing effect. We did exercise price increases in the US earlier than in international. So there is a little bit more coming through in international over the course of the rest of the year. So that should close the gap a little bit. The third point, maybe just to give you the full comprehensive picture, in the U.S., we've also had higher contribution of RTE, so a mixed shift to a higher value product. So it was not only price increases, but also a mixed shift to higher value products in the U.S., something that we haven't seen in international, where we haven't launched RTE yet, and will also not in the foreseeable future be of significant size.

Thank you.

And the next question comes from Andrew Gwynn. Please go ahead.

Hi there. Yeah, good morning. Yes, a good course, obviously. Just firstly, just clarify on repeat, sorry, the Q2 guidance, just to make sure we've got it all. You ran for it relatively quickly. And then my question, kind of very similar, actually, but in Q2, there's a little bit of drag potentially from the ready-to-eat market. Is that fair to say in the US? So obviously, sequentially, we're not getting the same growth coming through. Is it possible, just give us an idea where it was in Q1? Thank you very much.

So on the Q2 top line guidance, we're targeting around about 7.7 million active customers. So if you compare to the trend last year, last year you've seen Q1 to Q2 a sequential decrease in active customers of around about 400,000. So what we're targeting for this year is somewhat less. And that translates into a top-line year-on-year growth of 1% to 2% ballpark for Q2. Again, we're pretty early in that quarter. And then with respect to... ready to eat. As Dominic had mentioned, we are now at full capacity. So at least on a sequential basis, that business is going to be stable until we basically start to have our new facility in Arizona operational and can wrap that up.

Just are you able to give us a little bit more color just to help? It's obviously a very temporary drag in Q2, but just to get our heads around what the drag might be or

We're not guiding on that detail. Sorry, Andrew.

Okay, worth a try. Thanks very much.

And the next question comes from Yazid Shaikh. Please go ahead.

Hi there. You've actually got Joe Barnett-Lam from Credit Suisse. Sorry. Yeah, so just a question with regards to the marketing versus growth dynamic. You obviously pretty recently updated us on your sort of CAC versus LTV thoughts at the Capital Markets Day, but we'd love to hear sort of your most up-to-date thoughts on sort of current CAC and progression of CAC. Are there any signs that CAC's coming down, or is it sort of modestly trending higher? And then just also one clarification with regards to the outlook commentary. I think you said that marketing will be about one percentage point delta in Q2. That's, I assume, on a year-on-year basis. Will we see a similar sort of differential on a year-on-year basis through the year, or is there any phasing we should be aware of? Thank you.

Yeah, so let me maybe answer the last half of your question and Dominic is going to do the first bit. So in terms of Q2 marketing as percentage of revenue, they run about one percentage point data that is Yes, so marketing expenses as per central revenue would be around about a point higher in Q2 than they were in Q2 2022. um with respect to the full year if you remember what we discussed at our capital market day we said for the full year marketing as percentage of revenue also roughly a point higher than what we did in in 2022 so 2022 we are close to 17 for the year so for 23 that would be what's it for the full year closer to around about 18 percent

Yeah, and in terms of CACs and CAC development that we're seeing, I think it's pretty much in line with what we have been seeing throughout Q2, Q3, Q4 last year. So it hasn't been going up from those levels. It's pretty much stable, and we would probably forecast, according to our sort of like best knowledge, that it continues to stabilize at those levels. So no movement for the last, let's say, about nine months. Very much in line with that. Higher than what we have seen during COVID times, but at the same level, really, for the last nine months, really.

Excellent. Thank you very much, guys.

And the next question comes from Sebastian Patola.

Please go ahead. Good morning, everyone. Thank you for the presentation. Do you see any geographies in the international segment where maybe Factor will not work or maybe consumers are not ready for that proposition yet, please? And if that's the case, why, please?

So we're obviously yet to launch in international. So everything that I'm telling you now is a crystal ball. but I do not think that the European consumer is that different to the US consumer. I do think that sort of like our initial results that we have seen in Canada and also that we have seen ready to eat can grow to a meaningful volume in Australia points towards also consumers outside of the US being really excited about that product. So as we launch it in Europe in probably towards the end of Q3, I think we can sort of like prove some of our hypotheses. But where I stand right now, I don't think that this is really that there's really like vastly different behavior between U.S. consumers and international consumers.

Thank you very much. And if I may follow up, please. I know it's only been just a few short months since Factor has been launched in Canada. Do you see a similar fast adoption curve in Canada for Factor as compared to the U.S.? Please.

I'm happy that you're all excited about Ready to Eat. We're also very excited about it. But really, when we launched either a new meal geography or also, um, um, an RTE brand, the first sort of like 12 months are really all about finding product market fit. So making sure we can produce great meals at scale, making sure we understand what customers really like if we need to adapt our menus, et cetera. And we basically control the ramp up speed. So usually only when we see that all these things fall in place. So great customer satisfaction, good margin profile, then we actually dedicate a lot of our advertising dollars towards a brand. And so in the first 12 months, really our North Star that we're trying to optimize against is customer satisfaction and our manufacturing quality, as well as getting sort of like our margin profile in place, because that then makes scaling it up much more profitable than if we scale up prematurely. So I think there are very good indications about this working well in Canada, but I think We will only kind of like start scaling that up really sort of like towards the end of the year. We've launched it in, I can't remember, December or January. But so it's still quite early and we're collecting customer feedback and feedback on our production processes.

Thank you very much, Dominik.

Okay, so just to repeat the process, if you want to ask a question, please press 9 and the star key on your telephone keypad. And the next question comes from Markus Diebel. Please go ahead.

Hi, everyone. Two questions. Dominik, if you can maybe just elaborate a bit more on the ramp-up again on RTE. It will be interesting because we learned at the Capital Markets Day that RTE is about 10% of revenues. Now you're going to double RTE. effectively the capacity in the U.S. So the double the capacity in the U.S. The question I have here is how shall we think about this in terms of the ramp up in the U.S. market? Given there is a market that you have been into, you highlighted you're running at high utilization rates already, how quickly is that ramping up? And then also, how do we think about the marketing in the U.S.? I mean, I assume every HelloFresh customer that tried the product will get a Factor email. That seems to be the case from what we see. So it should be fairly cheap to ramp up the capacity there. Is that fair to say in the U.S. market? And then the second question would be on Christian, given that you gave us a lot of components for Q2 already, could you maybe give us similar to Q1, maybe an EBITDA component? what you see at the end of the day at the EBITDA. That would be great. Thank you.

Marcus, with regards to factory US, I think what's different to ramping it up in international markets is that we clearly have product market fit already. So we know which meals customers really like. We know sort of like the recipe ratings, etc. We know how to manufacture those meals. We still need to get it right to basically train labor and get them to sort of like follow all of the production processes. So it's not that we open up that facility and then the week after we're basically unconstrained in just acquiring as many customers as possible. But the ramp up curve should be much, much quicker than if you actually have to prove product market fit first. So to give you an indication, I would say once we open that facility, there's probably a ramp up plan of about 8 to 10 weeks. And at that point, we should be very comfortable if the indicators point to the right results to dedicate a lot of advertising spend towards Factor.

Perfect. And maybe, Dominik, since I have you, but the marketing, I just try to understand how how efficient the marketing will be? Because it seems like it's a nice ramp up, but you have a very large customer base already. So is it fair to say that marketing spent for this additional capacity will actually be much, much lower than the group average? That's basically what I'm after. Sorry.

So given the penetration levels, given where we are in the sort of like life cycle of that brand, and given the brand awareness that we have, I think You know, I've mentioned that before. It reminds us of meal kits in 2016 or 2017. So I think our base case assumption is that we can acquire customers at lower customer acquisition costs for our Factor brand. And that should help us sort of like get customers on an average basis and slightly cheaper in the second half of the year as more customers go to Factor versus our meal kit brands which operate at much higher penetration levels.

The next question comes from Emily Johnson. Please go ahead.

Morning. My first question is, you posted 3% growth at constant FX in Q1 with the hardest comp. Can you give us a bit more colour on why growth is slowing in Q2 when the year-on-year comps are 10 points easier? The second question is on the marketplace business. So you're now in 12 markets there. Can you give us an indication of what percentage of customers are captured within that? I think previously, might have been this time last year, you spoke about a low team's percentage take-up in markets where people were able to have marketplace add-ons and an average of a kind of $15 to $20 take up per basket on that. Is there any update you can provide on those numbers? I think they were for the US, but any comments more broadly would be helpful. And as well, if you have seen any impact of the cost of living crisis on that kind of extra discretionary spend with the marketplace business specifically. And then my third question is on the fulfilment costs, given you've had some benefit in the first half of the year from both your Phoenix site on the meal kit side opening up, which is your largest centre, which you'll start to annualise in the second half of the year, plus in the first half you are at capacity four factor. And to what extent should we expect any kind of negative drag from the factor site coming live in the second half of the year, given there will be more capacity available there? Thank you.

Okay, that was definitely a question with a lot of sub bullets. So let me try to pick off a few of those. So on the growth profile in the second quarter, Again, it's in line with what I tried to give you as parameters up front. So a top-line growth of 1% to 2%, so not too dissimilar versus what you've seen from us in the first quarter. And then keep in mind what Dominic just said, that basically it's a fact that we have at full capacity that's effectively where we right now think we will come out and what the reason of assumption is for for that for the growth profile on your fulfillment cost question it's true so there is some some capacity coming upstream but still that is all baked into what I told you before in terms of the contribution margin expansion not just in Q1 but also for the full year of at least a point that's what we stand behind even if there may be a little bit of volatility in a certain quarter or some month because of new capacity coming on stream and is going through that ramp up process

In terms of HelloFresh markets, I think as we have broadened the assortment slightly in the markets that were active, we've seen a higher share of customers actually taking on orders. So I think last year and also what you referenced here, we talked about low teens percentage of customers adding items to their basket. We've increased that number. I think it's now mid to high teens. that are adding an item to their baskets each week at least. And we do think that as we invest in broadening and making our assortment more attractive, that we can further grow that number going forward and also grow the basket size going forward. So I would say it's outside of the US and Benelux, where we have been active with HelloFresh Market for over two years now. It's still sort of like in prototype state. So meaning that the assortment is not super broad, et cetera. And as we increase that assortment, as we make that assortment more relevant, I do think that our customer uptake numbers should continue to grow. And also the basket sizes should continue to grow. So this will definitely be a material contributor to continuing to grow AOV going forward.

And the next question comes from Nizla Niza. Please go ahead.

Great, thanks. I think it's more of a follow-up to an earlier question, but I don't think we got the color just to sort of understand how margins are going to be like in Q2. Christine, you mentioned that the marketing cost would be one percentage point higher than Q2 last year, but gross margins could also be higher. So could the margins be flat year over year? Will there be some advantage due to fulfillment being better again that could then help. Could you give us some color maybe on the nitty-gritty there? Yeah, that would be my question. Thank you.

Yeah. We got a message from Marcos as well that he pointed out one part of his question which went into the same direction, was not fully answered, Tom. For Q2, when you think about, so down to the contribution margin level, we effectively are targeting that roundabout one point outperformance that you've seen from us in Q1 as well. And that's effectively what we are. targeting for ballpark for Q2 as well. On the marketing side, then we give that back. So from EBITDA margin perspective, would be reasonably similar, absent basically a couple of basis points basically on the G&A side where we're probably above. If you marry that with relatively modest top line growth in constant currency and also the dollar is on Q2 if it stays where it is right now. probably a touch weaker. That means in absolute EBITDA terms in the second quarter. And again, this is against the caveat that we're still early in that quarter, but in absolute terms, it would be reasonably ballpark in the zone where we were in Q2 last year, effectively. Does that make sense? Yeah, it does. Very helpful.

Thank you. And the next question comes from Nick Cota. Please go ahead.

Hi, good morning. Thanks for taking my questions. Three quick ones, if I may, please. Firstly, is it possible to get a sense of the underlying quantum of price increase for customers in the first quarter? Obviously, the balance is the impact of add-ons, surcharges and mix, but it'd be great to get an understanding of how much you're kind of under-inflating versus the broader kind of grocery or restaurant markets. And then secondly, is it possible to isolate or give a sense of the impact of RTE add-ons and that kind of flip-flop that you have in gross margin and fulfilment costs, just so that we can understand the underlying trajectory in both gross margin and fulfilment, excluding the kind of the RTE or add-ons impact. And then lastly, and perhaps more personally, on customer trajectory through the year, when should we expect actives growth to inflect? Is that a 3Q or 4Q? Thanks.

Let me go through these points. Impact of pricing of that overall AOV expansion that Dominic has gone through. Pricing impact there is a bit more than half of the overall impact that you've seen, that is seen from us. So not too dissimilar to what we had discussed in the past. In terms of the impact of more ready-to-eat and other factors on this on impact, how procurement versus fulfillment expenses come out. When you take the U.S., where basically most of that is visible when you look at North America, rather, when you look at our North America segment, where effectively procurement expenses have gone up year on year by around about two points, less than one point really comes from unmitigated underlying ingredients price inflation and all the rest. So most of the point is really from these effects that I've discussed. So more ready to eat, more meals per order, more surcharge, more add-on offerings.

Great. Thank you.

Is that helpful?

That's super helpful. Thank you.

Great. And so your third point was what again?

It was just on customer trajectory through the year. When should we expect actives to influx? Yeah. Yeah.

would be basically mid to latter part of the second half. So effectively by Q4.

Thank you so much.

And the last question comes from Andreas Riemann. Please go ahead.

Yes, good morning. Two topics. One is, could you speak about the performance of your three different meal kit brands in the US? Is there some down trading or anything you would like to call out here? And the second topic is actually, What is the average preparation time of meal kits? I'm asking that because I could imagine that they're getting shorter and shorter. So then the question would be whether the meal kit business is actually moving closer to the ready-to-eat business going forward. And therefore, the question is how have those average preparation times trended over the last few quarters or years maybe?

Andreas, let me take your questions. On the US brands and their relative performance, I think generally this is very much up to us and where we actually invest our advertising dollars. Just as a reminder, unlike a lot of other D2C brands, we operate a broad portfolio of geographies and brands. And so we always funnel our advertising where we actually see the best return on investment. In the US, now in the first quarter, I definitely think that we have prioritized every plate in Green Chef a little bit over HelloFresh Core. Not so much actually because we see like very bad incremental CAC efficiency at HelloFresh Core, but that throughout the pandemic, we have really funneled a lot of our investments into our HelloFresh brand and have under-invested in every plate in Green Chef. because we've had the highest profitability on every advertising dollar spent in the HelloFresh US brand. We have reversed that a little bit by mid last year. And I think if you look at Q1, Green Chef and EveryPlate have received more of the share of advertising dollars than in the past. And that has also led them to have a slightly sort of like a better year over year performance than our HelloFresh core brands. But I think the important point here is that it's not a binary decision for us whether we invest advertising dollars or not, but that we always look to allocate it to where we actually see the best return on investment. With regards to your second question, with regard to prep times, we have expanded our menu a lot. And so a lot of the meals that we have added to our menu have actually been meals with shorter prep times. And convenience is definitely something that no matter if you're a family customer or if you're a couple, if you follow specific dietary restrictions or not, I think this has been feedback that we've been getting a lot from certain groups of customers that they are looking for shorter prep times. We have heard that and have invested a lot into making sure we also have meals on the menu with shorter prep times. It's not like they have replaced other meals that we have on the menu because there's a lot of other customer groups that actually want to spend 40 minutes, 45 minutes in the kitchen preparing a nice meal. And so what we want to do is we want to give customers the choice. And as we have expanded the meals on the menu by about 32% year over year, a lot of the extra meals that we have added come with shorter prep time. So consumers can really make a conscious choice what type of meals they actually want to get.

Okay, thanks. So then the follow up on the first topic would actually be, I mean, the three brands in the US give you flexibility, as you just mentioned. Would that make sense to have basically the similar setup than in European countries, maybe?

We do have it in some European countries. So we have Green Chef in the Netherlands and in the UK. We have Every Plate also in Australia and in Canada. So we do have some of that flexibility as well as an international. Not to the same degree, just given the size of the market, but we do have that flexibility also in a number of our European or other international segment markets.

Okay, thanks a lot.

Okay, so at the moment we didn't receive any further questions, so let me hand back over to Dominik Richter for some closing remarks.

Thank you all for making the time and joining our Q1 2023 earnings call. I think overall, a lot of the points were obviously flagged at the capital markets day already. I hope we could provide some more color about how the rest of the year should shape up. And we look forward to welcoming you back the latest at our Q2 earnings call later in the year. Thanks so much and have a great day.